THE IMF REPLIES
A Letter to the Editor
by Vito Tanzi
Director of the International Monetary Fund’s (IMF’s) Fiscal Affairs
Department

The Washington Post
December 30, 1998

The International Monetary Fund welcomes an informed debate on the issues that led to the Asian
crisis, but Carol Welch of Friends of the Earth misstates the facts ["Look Closely at the
IMF's Record," letters, Dec. 8]. The allegation that the fund supported the Suharto
government for six months until the Indonesian public demanded "an end to the
IMF-Suharto partnership" is a distortion of the historical record.

One goal of the fund's program in Indonesia was to eliminate the sweetheart business
arrangements that distorted the economy and made the former regime so unpopular. The
accusation that the fund in Russia dealt "exclusively with a small group of political
figures" to "impose" policies by decree ignores the fact that the fund was
dealing with the legitimate government of Russia.

Ms. Welch's charge that IMF-supported programs have sent Asian countries into a
"destructive tailspin" that caused a sharp increase in poverty fails to recognize both
the complex confluence of events that undermined Asia's economies and the progress that has
been made in stabilizing the region. Still, the fund is deeply aware of the suffering that has
followed the crisis, and spending on social safety net programs has been increased
significantly.

In Indonesia, those programs account for 6.4 percent of gross domestic product in the current
fiscal year, and that is in addition to the usual spending on education and health. Programs include
targeted subsidies on food, electricity, medicine and other items. The rice subsidy, which sets
prices at one-third the market price for a monthly ration of 20 kilograms of rice, reached 5.6
million households (about 25 million people) by the end of October, and the government plans to
expand the program to reach several million more needy families by early 1999.

Ms. Welch also suggests that IMF policies have been an environmental disaster because they
encourage the destruction of Indonesian rain forests. The allegation is patently untrue. The
Indonesian government's letters of intent with the fund have from the beginning of the program
consistently included commitments aimed at protecting the environment, including the area of
forestry.